Michigan Department of Insurance issues bulletin on improper auto claim practices

The Michigan Department of Insurance and Financial Services (DIFS) issued a bulletin regarding improper claims administration practices in automobile insurance last week. 

It states that the director has learned of some insurance companies engaging in claims administration practices that violate the Insurance Code to the detriment of consumers. 

The department reminds insurers in the bulletin that it will take regulatory action if it identifies a code violation or a pattern of practices that violate the code.

“An insurer may not undertake a course of conduct that fails either ‘to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies’ or ‘to attempt in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear,'” the bulletin states.

The bulletin states improper claims administration practices for vehicle collision and comprehensive coverages may include, but are not limited to: 

• • “Making misrepresentations to claimants during claims administration;
  • “Failing to investigate claims promptly;
  • “Failing to make timely payment on claims that are not reasonably in dispute;
  • “Failing to pay the statutorily required interest for untimely paid claims;
  • “Declaring a vehicle a total loss and accepting transfer of the vehicle’s title without first completing an investigation of the claim and agreeing to pay the claim;
  • “Inducing a claimant to transfer a vehicle’s title and subsequently canceling or purporting to ‘rescind’ the policy based on alleged misrepresentations that could have been uncovered earlier through reasonable diligence;
  • “Retaining the proceeds from the sale of a vehicle transferred by the claimant after the insurer has cancelled or purported to ‘rescind’ the underlying automobile insurance policy based on alleged misrepresentations;
  • “Investigating underwriting issues after a claim is filed without having reasonably investigated those issues before issuing the policy;
  • “Denying claims or offering to pay substantially less than what is owed on claims when liability is reasonably clear; and
  • “Unreasonably prolonging the claims administration process or making unreasonable proof-of-loss demands to improve the insurer’s bargaining position or to identify a pretext to invalidate a claim.”

Possible sanctions for abusive practices could include fines and/or suspension or revocation of an insurer’s certificate of authority. 

DIFS will investigate complaints of unfair trade practices, the bulletin said. 

The bulletin encourages any consumer with knowledge of abusive conduct to file a complaint on the DIFS website at michigan.gov/DIFScomplaints or by calling DIFS at 877-999-6442. 

Some news media outlets in Michigan are reporting that the bulletin was issued after attention was brought to multiple lawsuits against Cure Auto Insurance. 

Multiple consumers told The Detroit News in August that Cure Auto Insurance took consumers’ vehicles and then denied their claims.

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